However, we have also noted that with the marked change in tone in favour of stimulus (even though the government subsequently denied any plan to give massive stimulus), banks could be once again forced to lend for the sake of manufacturing GDP growth by providing funding to projects that no longer makes sense. Not to mention that Chinese banks have a habit of doing things towards the end of the period.

So what is the outcome? Well, the Big 4 banks have lent RMB253 billion for the whole month of May, up from RMB34 billion in the first 20 days according to China Securities Journal. And consistent with the recent trend, large proportion of the new lending came from short-term bill financing, not medium to long term loans. At the same time, bank deposits at big 4 banks fell again by RMB220 billion for the full month of May.

Currently, the big 4 banks accounted for roughly 40% or so of total loans outstanding. If the big 4 banks accounted for the same proportion of new loans for May, the total new loans for May would be around RMB600 billion, while the Chinese Securities Journal went for RMB700 billion. Whatever the final number is, credit demand is clearly weak, and we will be wondering if the current "stimulus" will be able to boost lending in the months to come.